“Most corporations do not have black people on their boards and few, if any, black people in senior management. This is part of the reason that we have a high level of racial inequality in the US.”
On July 2, 2020, Bottini & Bottini filed a shareholder derivative lawsuit against the Board of Directors of Facebook. In 2018, Facebook created the image that it was trying to diversify its all-white Board by hiring highly-respected and experienced Kenneth Chenault to join its Board. Chenault’s appointment gave Facebook the guidance of a highly regarded finance executive and the first Black director on its all-white board, USA Today reported at the time. But then Chenault unexpectedly resigned in March of 2020 because he said Zuckerberg was not listening to his advice. See Jeff Horwitz, “Chenault Leaves Facebook Board After Disagreements With Zuckerberg,” THE WALL STREET JOURNAL, March 13, 2020 (“Mr. Chenault grew frustrated that the CEO wasn’t taking his advice”).
The complaint alleges that Facebook’s approach to diversity has been characterized by tokenism: make a small gesture to satisfy appearances, but don’t make any underlying substantial change. The message at Facebook is set at the top – by Zuckerberg and the rest of the Board of Directors (“Board”).
The complaint alleges that Zuckerberg and the Board have failed to curtail hate speech against Black individuals and other minorities and have failed to achieve real diversity on the Board and among the senior executive ranks, leading to an employee walkout and massive boycott of ad spending on Facebook by over 300 of the Company’s advertisers. On June 1, 2020, after Zuckerberg refused to take down a Trump post stating “When the looting starts, the shooting starts,” which had been widely interpreted to reflect racist views that violence should be used against Black Lives Matters protesters, employees participated in a walkout to protest the Board’s broader failure to curtail hate speech against Blacks and minorities.
The complaint also alleges that not only has it failed to achieve meaningful diversity and inclusion among Black individuals and other minorities, Facebook’s Board and executives have allowed discriminatory advertising on its platform. In addition, Facebook’s Board has repeatedly made gross misrepresentations in the Company’s public statements by representing that the Company has effective policies, internal controls, and procedures designed to ensure diversity and to eliminate discriminatory advertising.
Under pressure to make its workforce more closely resemble the more than 2 billion users it serves, Facebook increased the number of black employees to 4 percent of U.S. employees in 2018 from 2 percent in 2016. Yet just 1 percent of technical roles are held by blacks and 2 percent of leadership roles. Black women account for an even smaller fraction of the workforce. Overall, Facebook employs 278 black women out of a U.S. workforce of just under 20,000.
In late May 2020, Facebook came under heavy criticism by its own employees for refusing to censor or moderate hate speech. Then, in late June 2020, advertisers announced their intention to boycott Facebook due to, among other things, the Company’s failure to ban hate speech directed to Blacks and other minorities. On June 22, 2020, North Face, REI, and Patagonia announced plans to boycott Facebook and pledged not to pay for advertising on Facebook platforms. In response to the growing list of over 100 advertisers like Unilever that had announced plans by Friday, June 26, 2020 to boycott Facebook due to its repeated failure to ban hate speech, Facebook’s stock tanked 8.3% on June 26, 2020. On Sunday, June 28, 2020, several additional advertisers announced plans to join Unilever in its boycott of Facebook. Facebook announced plans to finally take some steps to ban hate speech, but the advertisers refused to withdraw from their plans to boycott Facebook, indicating that Zuckerberg’s steps came too late.
The complaint seeks damages caused to Facebook by the breaches of fiduciary duty committed by the Company's Board of Directors, and seeks corporate governance changes to increase diversity on the Board and executive ranks.